CBDT issues norms on residential status of companies

Tribune News Service

New Delhi, January 24

The Central Board of Direct Taxes (CBDT) today issued guiding principles for determination of Place of Effective Management (POEM) of a company which intends to target shell companies which are created for retaining income outside India.

The concept of Place of Effective Management (POEM) for deciding the residential status of a company was introduced by the Finance Act, 2015. It is effective from April 1, 2016 and accordingly shall apply from assessment year 2017-18 onwards, an official statement said.

The final guidelines provide for an Active Business outside India (ABOI) test, so as not to cover companies outside India which are engaged in active business.

The CBDT said the intent is not to target Indian multinationals which are engaged in business activity outside India.

The intent is to target shell companies and companies which are created for retaining income outside India although real control and management of affairs is located in India, the CBDT said.

It has been further decided that the POEM guidelines shall not apply to companies having turnover or gross receipts of Rs 50 crore or less in a financial year.